Nothing comes easy for lawmakers this year. Among the perks of power is the ability to deliver for the folks that elected you, the surest way to secure their support in the next election.
For Democrats, that commonly involves boosting spending for health, education and social services programs, expanding environmental and workplace regulation, helping union organizers and increasing public employee salaries and benefits.
Republicans prefer cutting taxes, spending and regulations.
Plummeting state revenues, matching the trajectory of economic decline, have hamstrung the Democratic majority this legislative session. Lean budgets favor conservatives. Economics, the dismal science, is often characterized as dealing with the allocation of scarce resources.
Scarcity is the one thing there’s plenty of right now. And its allocation plagues lawmakers forced to deny fervent pleas from their biggest supporters. They’re breaking campaign promises with the intensity, but none of the joy, of kids popping bubble wrap.
Last Thursday, Arun Raha, the state’s economic forecaster, dropped another dire prognostication. He now figures revenues from this budget cycle through the next will grow by just two-tenths of 1 percent. It doesn’t get much flatter than that.
This year’s revenues – mostly sales, business and property taxes – are down about $1.3 billion, 8.5 percent, from last year’s collections. The fiscal year ends July 1, and the drop will require lawmakers to make further reductions in the current budget to bring it into balance.
After the forecast, talk quickly turned to the impending $9 billion budget shortfall, nearly three times the $3.2 billion deficit projected last September.
Those who follow this stuff casually think that a $9 billion shortfall means tax collections are down that much. Not nearly. While the state is experiencing a revenue downturn this year, that dip primarily affects the last four months of the current two-year budget cycle.
Although the governor and Legislature have acted to curb spending, there’s a lot of work left to do. The legislative lassitude in addressing the known and immediate deficit rivals the economic torpor. Earlier action would have increased savings and reduced carry-forward costs.
In the next biennium, beginning July 1, revenues will rise, albeit sluggishly, like a punch-drunk heavyweight trying to regain his footing before the 10 count. Of course, we’re climbing from a lower base and there’s still plenty of economic uncertainty. We may get another unpleasant whack in the June forecast.
The news is bad and deteriorating. Some in Olympia have resurrected Lily Tomlin’s adage, “It’ll get worse before it gets worse.”
Problems overstated, however, compound. The “don’t waste a crisis” mind-set promotes overreactions. Congress has already gone there, with trillion-dollar bailouts and unread stimulus bills.
Here, we have alternatives, beginning with a proper definition of the problem. Consider the shortfall as the difference between available revenues and the ongoing cost of maintaining state operations. To get to a $9 billion hole, you must take the most conservative view of revenues and the most liberal view of costs.
We can cut the gap between forecast revenues and expenses by applying about $3 billion in federal stimulus money and tapping the $700 million rainy day fund. Then take a sharper look at spending. In addition to the cost of ongoing operations, the liberal view includes more than $1 billion in discretionary increases, mostly pay hikes. Forget them.
So now we have a $4.5 billion gap, far from trivial, but manageable, particularly when you consider that lawmakers increased spending $8 billion over the last four years.
Key legislators say they are still evaluating options, whether to stick with an “all cuts” budget or offer voters an opportunity to “buy back” programs with new taxes.
“All cuts” is a marketing ploy to exaggerate the pain – the next budget, like all budgets, will contain cuts and adds, reflecting mandates and priorities. Legislators should not expect taxpayers to “buy back” government programs. Most would rather buy back a movie night, a restaurant meal, or clothes for the kids.
It’s past time for legislators to acknowledge the hard times, act decisively and adopt a sustainable budget, with compassion and without tax hikes. Economic recovery depends on getting this right. Don’t pass the buck to the voters. We’ll simply pass it back.
Bainbridge Island resident Richard S. Davis writes on public policy, economics and politics. He is a guest blogger on the Inside the Editorial Page blog at blogs.thenewstribune.com/oped. His e-mail address is richardsdavis@gmail.com.
